inflation types..and causes...and remedies...

1. Muhammad Aamir Kiyani

3. Inflation?
Continuous rise in
prices

4. Types of
Inflation
according to
RATE

5. “When the rise in prices
is very low like that of
a snail or creeper, is
called Creeping
Inflation”

6. Prices rise
moderately

7. Prices rise rapidly
Also called Runway or Galloping inflation
Immeasurable and uncontrollable

8. Prices rise very fast at
double or triple digit
rate.
Also called Runway or
Galloping Inflation

9. Quantity Theory
Demand Pull Theory
Cost Push theory

10. Quantity theory:
The quantity theory of inflation states that too much
money in the economy leads to the inflation.
%change in the money supply
level
same % change in the overall price
Y= total output produced
M=amount of money available in an economy
V=the velocity of money
P=the overall price level in an economy

11. Demand Pull Inflation:
When the aggregate
demand increases more
than the supply.
Amount House hold (increase)
Demand (increase)
Prices (increase)

12. Demand Pull causes
•
•
•
•
Increase in the money supply
Increase in population
Gov. expenditure
Credit creation

13. Cost Push Inflation:
When cost of production
increases the price level
automatically increases.

14. Cost push causes:
Increase in indirect taxes

15. Increase in prices of raw material

16. Shortage of supply FOP

17. Devaluation of money

18. •
•
Monetary Measures
Fiscal Measures

19. Monetary Measures
•
•
•
•
•
Bank rate policy (interest rate increase)
Contraction money supply
Open market operation
Variable reserve ratio
Credit rationing

20. Fiscal measures
•
•
•
•
Higher direct taxes (causing a fall in disposable income)
Lower Government spending
A reduction in the amount the government sector
borrows each year (PSNCR)
Direct wage controls - incomes policies

22. Any Question?